2. Corporate Venturing
Teaching Elephants to Dance
Not Afraid to Fail
2

3. J. Carter Williams
Serial Entrepreneur
&
Managing Director
Open Innovation Ventures
&
Founder
MIT Corporate Venture Consortium
&
Founder
Boeing Ventures
Corporate Venturing
Email: carter@oiventures.com
Web: www.oiventures.com
Twitter: oiventures
Outline of a Discussion
Medellin, 09 March 2011

4. • Why Corporate Ventures
• How to do it: Case Study
• Key Lessons Learned
• Next Steps
4
Today’s Discussion

5. • Entrepreneurs: 25% of US GDP growth, 12% of population
• S&P 500’s top quartile performers are only 10 years old
• Over 80% of new jobs are generated by small business
• 34M new jobs since 1980 while Fortune 500 lost 5M Jobs
• 71% of ideas are modified ideas encountered in
employment
• 80% of start-up funding is from customers and savings
• 80% of Forbes 400 are first generation
• 20% of downsized managers over 40 start a business
5
U.S. Innovation Data
Why Corporate Ventures

6. Integrating Two Worlds
What Corporations Do Well
• Deliver large scale systems
without compromise
• Build enduring relationships
with current customers
• Leverage processes to
deliver value
• Manage Programs
What Entrepreneurs Do Well
• Make scale and legacy
irrelevant
• Find whole new customers
and build new relationships
• Leverage talent to deliver
value
• Manage Opportunity
Corporations can achieve top decile S&P 500 performance by integrating
entrepreneurial DNA into Corporations world class systems, processes,
relationships and opportunities.
Why Corporate Ventures 6

7. Reasons to Venture….
• Make Money
– Pension Fund
– No better place to put
money
• Subsidize R&D
– Spin Out and Re-acquire
– External capital is
momentarily cheaper than
internal
• Disruptive Technology
– Prevent “Corporation”
from killing good ideas
• Talent
– VC model attracts talent
– Compensate Innovative
Employees
• Find Technology
– Search the Earth
– Hedge
– Leverage company's
distribution and marketing
• Set Standards
– Get developers on board
– Intel A-64
7Why Corporate Ventures

8. 8
A Case Study
2001
1 Million parts flying in formation

9. • Find and Implement Growth Opportunities
• Eliminate the Barriers to Opportunities
• Gain Recognition as an Innovative Company
• Capture and Grow Employee Enthusiasm
• Create Multiple Paths to Growth
Chairman’s Initiative
Chairman’s Innovation Initiative Provides Every Employee the
Opportunity to Identify Growth Opportunities
9How to: Case Example

10. Disciplined Investment
Innovator
Decides
& Acts
Phase 1 Phase 2
Gate
1
Review
Gate
2
Review
Phase 3
Gate
3
Review
Gate Reviews
2 page
white
paper
(WP)
Refine WP
54 6
$30-
$60K
$50-
$100K
Prototype
and
market
validation
Product
and
market
dev.
Market
expansion
Innovation Resource Center
resources assigned
Develop Business
Plan
Improve Business
Plan
BPBP
Board of Advisors (BOA)
Oversight
Needs
more
work
BV Mentor
assigned:
Coaches
innovator, helps
with WP and
process
Value RealizationValue Creation (Chairman’s Innovation Initiative)
WP
BV Partner/ Advisor assigned:
Assists and coaches in planning phases
Idea
$0.5-
$1.0M
$5 -
$10M
BV Partner: Advisor
Portfolio Manager
Implement Business Plan
Boeing Ventures Investment Commitment
Re-work
and re-
submit
How to: Case Example 10

11. • Entrepreneur
– Someone with a new business idea who wants to build a
business
• Prospective Team Members
– Self Nominating list of people interested in joining new
ventures
• Mentors
– Business Generalist who coaches teams, through all
phases, on marketing, engineering, finance, etc.
• Specialists
– Tech Fellows, Venture Capitalists and other non-technical
skills that are available on an ad-hoc basis to help answer
specific questions
Internal Ecosystem
11How to: Case Example

12. Spin-Outs
3
7 in Phase 4
784
Submittals
7 in Phase 3
30 in Phase 2
60 Active Projects
190 Concepts Mentored
12How to: Case Example

13. Barriers to Corporate Innovation
“Can We Innovate”
vs.
“Can we remove the barriers to Innovation”
Risk Tolerance
New businesses share the
companies balance sheet, but
have different investment
patterns
Oversight
The governance for core vs.
growth businesses differs greatly
Talent
Employees from the core
business rarely have skills to lead
new business
Procedures
Indemnification, benefits,
compensation, annualized
systems, etc
13Key Lessons Learned

14. • 99.7 % of corporate venturing groups cease
operations within 3 years, regardless of
performance.
• Many firms will re-start corporate venturing
activities every 5-10 years.
14
Corporate Indecision
It takes 7 Years for classical ROI success
Talent is the leading indicator
Key Lessons Learned

15. Real Growth Takes Time
15Key Lessons Learned

16. Premise1:
A firms most enduring asset is its customers
Corollary 1:
The importance of marketing and distribution
exceed that of R&D
Premise 2:
Corporate Venturing is about renewing a
corporation’s innovative aptitude, its aptitude of
understanding customer value.
16Key Lessons Learned
Innovation is harder than Invention

17. • Immerse….
……employees in entrepreneurial endeavors
……decisions makers in entrepreneurial leadership
……technologists in entrepreneurial innovation
• Expose barriers to entrepreneurial models
…….legal, risk, HR, finance etc.
• Shift from “Omnipotent” to “Market Validation”
based decision making
• Tap into the unutilized talent of employees
(under-employed)
Create the Culture
Next Steps 17

18. The Ecosystem and The Goal
Corp.
Partner
IPO
Other Trade
Sale
Education
Tech Transfer
Forum
Mentor Network
BioGenerator
Nidus
Center for Emerging
Technology
Source Qualify Mentor/Angel VC
University IP
Company IP
Entrepreneurs
Plant & Life
Sciences
Advanced
Manufacturing
Information
Technology
Referrals
incubators, corporate,
Venture Capital
Investment
Conferences
Advocate
Wash U
Idea Bounce
Hatchery
University
Enterprise
Forum
Bio Tech
Committees
Real Time
Embedded
Systems Groups
Bio Informatics
Communities
Incubators
Local
Midwest
National
Steady State GOAL: 3 to 5 $50 million companies/year
20
Funded
100
Qualify
50
Mentored
200-300
Technologies
External Sourcing
(Non St. Louis)
County Incubators
Layoffs
Exit
Arch Angels
3-5
Exits
Next Steps 18

19. • Pursue Company and Regional Alumni
– Smart people who left region: 30-50 years old
– Value Prop: Life in Medellin is easier and affordable
– Make a difference for your community
• Corporate Network
– Pickup talent local corporations identify but don’t use
– Link to Layoffs/Early Retirement/Down Sizing
• Database for Talent: LinkedIn, Etc
• Recruiters – Search firms / In country reps / Speeches
• Venture funding with feet in talent pools (Boston, India)
• Angels – Match fallen angles (“Talent”) with money
• Leverage Parents and Grandma
Talent is Vital
Next Steps 19

20. • Technology Risk: High, Medium or Low?
– BioMed, Energy, Agriculture, Steel, Textiles, etc
– Natural advantage?
• Market Risk: High, Medium or Low?
– Inventory our relationships with potential corporate acquires
against the region’s technology base and large companies.
– Relationships with bigger markets?
• Funding Risk: High, Medium or Low?
– How much money do we need to succeed?
– Money follows people
– Can someone tap into regional wealth?
• People Risk: High, Medium or Low?
– Entrepreneurs / Boards / Angels / Investors
Exercise #1: Venture Assets
Next Steps 20

21. • What is the history of company’s greatest success?
– What is the product considered most responsible for
company success……
….a product you had little to do with….
….something that “made the company”
– Find the original employees and customers from that
time, and ask them:
• How did the product come to be?
• Was it always deemed a success?
• Did you ever think it was going to fail?
• What made it a success in your company?
– Do the same study for a project that became a failure.
21
Exercise #2: Innovation History
Next Steps

22. • Have a goal in mind (10M? 20M?)
• Would an Entrepreneur want to do business with
your corporation
• Customers are the only validation of Innovation
• Bill Gates, Steve Jobs and Mark Zuckerburg have
the same 24 hours in their day
• It will take 7 Years to see classical ROI results, so
focus on Revenue growth
22
Next Steps?
Next Steps